Correlation Between Cytogen and Union Materials

Can any of the company-specific risk be diversified away by investing in both Cytogen and Union Materials at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cytogen and Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cytogen and Union Materials Corp, you can compare the effects of market volatilities on Cytogen and Union Materials and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cytogen with a short position of Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cytogen and Union Materials.

Diversification Opportunities for Cytogen and Union Materials

0.34

Correlation Coefficient

Cytogen  Union Materials

Weak diversification

The 3 months correlation between Cytogen and Union is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cytogen and Union Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Materials Corp and Cytogen is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cytogen are associated (or correlated) with Union Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Materials Corp has no effect on the direction of Cytogen i.e., Cytogen and Union Materials go up and down completely randomly.

Pair Corralation between Cytogen and Union Materials

Assuming the 90 days trading horizon Cytogen is expected to under-perform the Union Materials. In addition to that, Cytogen is 2.02 times more volatile than Union Materials Corp. It trades about -0.08 of its total potential returns per unit of risk. Union Materials Corp is currently generating about -0.01 per unit of volatility. If you would invest  242,000  in Union Materials Corp on October 24, 2024 and sell it today you would lose (11,000) from holding Union Materials Corp or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Cytogen  vs.  Union Materials Corp

Cytogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cytogen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Union Materials Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Materials Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Union Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cytogen and Union Materials

The main advantage of trading using opposite Cytogen and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cytogen position performs unexpectedly, Union Materials can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Union Materials will offset losses from the drop in Union Materials' long position.

The idea behind Cytogen and Union Materials Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.